Starting in 2016, UNCDF sought to support West African microfinance institutions in their digital transformation. After its work with Caisse Autonome pour le Renforcement des Initiatives Economiques par la Microfinance (CAURIE-MF) in Senegal, UNCDF started a ‘bank-to-wallet’ project with Association de Lutte pour la promotion des Initiatives de Développement (ALIDé) and the operator Mobile Telephone Networks (MTN) in Benin. A previous blog post discussed the first stages of this project.

Following a pilot conducted between April and December 2018, with technical assistance from the consulting firm PHB Development, the bank-to-wallet service is now operational and available within 11 ALIDé agencies. Over 4,000 customers have registered, 50 percent of whom are actively using the service. These results are rather encouraging for a debut project in Benin.

Among the many successes were the marketing activities carried out by the two partners, ALIDé and MTN. Their marketing plan included a variety of activities, ranging from sales demonstrations and promotions at markets to text messages and presentations of the service to ALIDé solidarity lending groups. Both partners stepped up their efforts to raise awareness and inform customers at each of the pilot agencies. The bank-to-wallet service is a complex concept for vulnerable customers, who are yet to grasp fully the concept of mobile money. Thus, it was important to explain the service clearly, which is why each customer received a user guide developed by both partners.

Customers' experiences were very positive, especially with loan repayments. Customers living in remote or isolated areas save time and money using the service. Pierrette, a customer based in Cotonou who uses the bank-to-wallet service, confirmed this finding. With this new digital solution, Pierrette changed how she manages her small cereal business.

She says, “I do everything with my phone. I’ve saved a lot of time and money on transport. I no longer have to close my business to travel north for supplies. It has changed everything! My business has tripled.”

However, ALIDé has not yet achieved its savings mobilization targets, for two main reasons. The first reason relates to transaction costs. Each savings transaction incurs a fee of US$0.34. While this fee is perfectly suited to borrowers who only carry out one repayment transaction per month, customers who are frequent savers see no benefit from it.

Jacques, a customer based in Cocotomey, explains, “I’m all for repaying my loan with my mobile phone, but for savings, I prefer to go through the agency—it’s cheaper.”

The second reason relates to the attraction of new customers. To increase savings, ALIDé not only needs to persuade its current customers but also and most importantly to win over new types of customers who need a savings account to carry out their projects. ALIDé must invest in its sales force by employing new recruits who are dedicated to the savings product.

Finally, the development of appropriate pricing would help the service take off (fixed monthly charges, reduced transaction costs regarding repayments, returns on savings, rewards for customer loyalty, etc.).

Based on the results of the pilot, ALIDé intends to improve its offer, particularly to promote savings. It has already begun to pay interest on savings at a rate of 3.5 percent per annum to attract more customers.

In general, the bank-to-wallet service has greatly improved the customer experience and helped the microfinance institution to improve its operational efficiency. ALIDé is continuing to develop its services, as it hopes to reach 6,000 new rural customers by the end of 2019.

Bank-to-wallet services will change the relationship that microfinance institutions have with their customers. ALIDé agencies have become more efficient, as Léonce, a customer based in Porto-Novo, confirms:

“Since we’ve had this solution, I’ve not gone into a bank branch. When they called me today, I was surprised.”

With the rise of digitalization, the new challenge for microfinance institutions will be to maintain a close relationship with their customers while increasing their provision of digital services such as loans or insurance policies.